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An Explanation of Optimal Each-Way Bets based on Non-Expected Utility Theory

  • David A. Peel
  • Davind Law

The purpose in this paper is to demonstrate how the non-expected utility models of Markowitz and Kahneman and Tversky can explain why an agent, chooses to bet each way on a horse. We also show that that appeal to moments of return, such as a preference for skewness of return, ceteris paribus, to explain the choice of the each way gamble over the single win gamble is, in general, invalid.

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Article provided by University of Buckingham Press in its journal Journal of Gambling Business and Economics.

Volume (Year): 3 (2009)
Issue (Month): 2 (September)
Pages: 15-35

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Handle: RePEc:buc:jgbeco:v:3:y:2009:i:2:p:15-35
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  12. David Peel & David Law & Michael Cain, 2000. "Product bundling and a rule of thumb versus the Harville formulae: can each way bets with UK bookmakers generate abnormal returns," Applied Economics, Taylor & Francis Journals, vol. 32(13), pages 1737-1744.
  13. Chris Starmer, 2000. "Developments in Non-expected Utility Theory: The Hunt for a Descriptive Theory of Choice under Risk," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 332-382, June.
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